Senate hearing on Comcast merger comes amid major concerns

By Bob Fernandez, Inquirer Staff Writer

Posted: April 07, 2014

The Senate Judiciary Committee will hold the first public hearing on Comcast Corp.'s proposed $45.2 billion deal for Time Warner Cable Inc. on Wednesday, amid regulatory and financial concerns about merging the No. 1 and No. 2 cable-TV companies.

The hearing likely will be a forum for a word most people - cable customers or not - will find unfamiliar: monopsony. It is a market condition in which there is only one big buyer for services or goods.

In the context of a combined Comcast and Time Warner Cable, it describes how the giant cable-TV company would be the major purchaser of Hollywood entertainment because of its tens of millions of cable-TV subscribers, and thus could dictate economic terms to the programmers.

Comcast says that the federal courts have rejected the too-big argument twice over the last 13 years and that the negotiating power resides with the Hollywood programmers, not TV distributors like itself.

As a condition of the proposed Time Warner Cable deal, though, Comcast has agreed to sell off about three million cable-TV customers, which some might see as mitigating its potential monopsony power.

Comcast and Time Warner Cable announced the all-stock deal in February.

"Comcast will not possess monopsony power as a result of the Time Warner Cable acquisition," Comcast's chief spokeswoman, D'Arcy Rudnay, said Friday. She added that "Comcast is one of many buyers of video programming."

Comcast executive David L. Cohen, who heads the telecom company's multimillion-dollar government affairs and lobbying apparatus, will testify at Wednesday's hearing and could face sharp questioning from Sen. Al Franken (D., Minn.), a Judiciary Committee member who says the megamerger will be bad for consumers.

"I'm concerned that this deal will result in higher prices, fewer choices, and even worse service for consumers," Franken told The Inquirer on Friday. "I know that Comcast has an army of lobbyists pushing this deal, but we need to make sure that consumers' voices are being heard, too, and I hope we have that opportunity at the hearing."

Franken recently told CBS This Morning that "there will be less competition and there will be less innovation" with a merged Comcast/Time Warner Cable. "This is too much concentration of power," he added.

Franken penned a March 19 letter to the Justice Department's Antitrust Division, warning that merging Comcast and Time Warner Cable "would give even more leverage [to Comcast] to manipulate Internet traffic to serve its corporate interests."

Comcast has acknowledged that the deal won't bring down cable-TV rates for consumers, or even slow cable-rate hikes. The company has said it will voluntarily follow open Internet rules through 2018.

As of late Friday, the Senate Judiciary Committee had yet to release a witness list for "Examining the Comcast-Time Warner Cable Merger and the Impact on Consumers" in the Dirksen Senate Office Building.

Sen. Patrick J. Leahy, a Vermont Democrat, is chairman of the committee. Other Democrats include Sen. Dianne Feinstein of California and Sen. Richard J. Durbin of Illinois.

Sen. Amy Klobuchar, a Minnesota Democrat like Franken, said in a brief statement to The Inquirer, "Consumers deserve fair prices and high-quality service for their TV and Internet access, and I plan to carefully review those aspects of the proposed agreement."

Sen. Charles E. Schumer, a New York Democrat and Judiciary Committee member, has recused himself because his younger brother worked for Time Warner Cable on the deal as an outside attorney.

The committee's ranking Republican is Iowa Sen. Charles E. Grassley.

A second issue likely to be discussed Wednesday will be a combined Comcast/Time Warner Cable high-speed broadband market share. The combined company would serve 35 to 40 percent of the nation's Internet customers, according to estimates.

Comcast says the estimate does not account for the wireless industry that offers high-speed Internet services that compete with wireline providers.

"We're concerned about it," Colleen Abdoulah, chair of Wow! Internet, Cable & Phone, an Englewood, Colo., telecom company that competes with Comcast, said last week.

"But we're pragmatists and realists. We probably will not go down the path of fighting the merger, because that would be ridiculous, because it will probably go through."

Comcast shares have taken a beating since the deal was announced Feb. 13, losing about 10 percent of their value. The company's shares fell 1.8 percent, or 94 cents, to $50.18 a share Friday. Comcast shares closed at $55.24 on Feb. 12.

Comcast chief executive Brian L. Roberts has said cable has to break out of its historic regional business model and create a company of national scale. The cable industry was initially created through about 30,000 fragmented municipal franchise areas. Comcast, Time Warner Cable, and others consolidated those areas into their corporations. Time Warner Cable's cable-TV areas include the cities of New York and Los Angeles.

"The alternative was to sit around and let cable die a slow death," Roberts was recently quoted as saying regarding the merger. Without Time Warner Cable, "the result is, we're not in New York or Los Angeles. How great can that be?"